Product differentiation is a marketing strategy that focuses on showcasing the uniqueness of your product or business in comparison to the … For example, a company that’s driven by quality and craftsmanship will demonstrate a strength in #2, Product or Service Superiority. A strategy for differentiation is referred to as a broad differentiation strategy, which is a type of competitive strategy where a company offers unique products or services that differentiate companies from their competitors. Where as a company focused on being a low-cost competitor will gravitate towards #3, Production Efficiency. Every company is different, and every company goes about their USP differently — but the key is, if you can make it loud and clear why your product/service is better than your competitors and then word it in a catchy and engaging way, your USP will dominate. Put simply; it is the process of distinguishing a good or service from others, i.e., making it stand out. Product differentiation may involve, promotions, product packaging, product design, quality, and extra features. A mid-day, off-season hotel reservation at a small boutique hotel is frequently much cheaper than one booked for a weekend during the height of the tourist season. Hotels, airlines and resorts all employ differential pricing based on the day of the week and season of the year. Product differentiation is probably the most visible. If Company X produces a coffee maker virtually identical to that of … T-Mobile. Examples of Differentiation in Marketing. Online artisan store and shopping gallery, Etsy offers its users the chance to showcase their handmade wares and... WALMART. PORTER’S GENERIC STRATEGIES 2. Porter's Generic Strategies with examples 1. A distinctive capabilityis an ability to do something no other competitor can … Each brand differentiator is broad, but they consume a lot of resources and expertise to achieve. Started... 2. Interestingly enough, IKEA also follows a differentiation strategy to a certain extent, along with its cost leadership advantage. All Rights Reserved. They know the quality of each one. © 2019 www.azcentral.com. For example, a candy company may differentiate their candy by improving the taste or using healthier ingredients. Competitive advantage means having an edge over rivals in the provision of a certain product or service. For example, a beverage company may package its products in containers that are designed to store comfortably on the shelves built into a standard refrigerator door. The volume discounts allow the business to bring in more revenue in a single transaction while granting the buyer a lower price per unit. Regarding their quality, we have no idea which one is best. Innovation / Invention – The best way to implement differentiation strategy is to invent or innovate. Product differentiation is a marketing process in which a product is differentiated from others. Differentiator: bringing a natural beauty brand to the makeup industry as an authentic alternative to traditional... T-Mobile. Some people simply say ‘differentiation‘ with the meaning ‘product differentiation.’. Example. When you position a… For example, when considering drinks, consumers may choose one because of its taste. There are three types of product differentiation. Michael Porter has argued that a firms strengths ultimately fall into one of two headings: cost advantage and differentiation. In any market, there are segments where customers are willing to pay more for additional product features, allowing companies to implement focused differentiation strategies that serve an elite customer base. With all of Porter’s Five Forces lower, a company may see economic value from a product differentiation strategy. The following examples just scratch the surface. Spearheaded by Richard Branson, Virgin Airlines is one of the multiple industries grouped under the “... ETSY. In a 1997 Harvard Business Review article, ‘Discovering New Points of Differentiation,’ Rita Gunther McGrath and Ian MacMillan wrote: “[Product differentiation is] offering customers something they value that competitors don’t have.”, According to MarketResearh.com: “Differentiation allows you to provide superior value to customers at an affordable price, creating a win-win scenario that can boost the overall profitability and viability of your business.”. In increasingly crowded competitive landscapes, differentiation is a critical prerequisite for a product’s survival.What does your product or service do/accomplish/offer that the competition does not? Consumers are not certain about the quality of the products that they compare. Only in one product (or few); The rest of its products may be ordinary; That product is targeting a small Market segment. It invests in production, distribution, … Inbound marketing has been positioned as the future of marketing, in that it pushes you to connect with your customers where they are and how they want to be talked to. Market Business News - The latest business news. In this context, ‘marketplace’ means the same as ‘market’ in its abstract sense. In this ehowfinance video, Alex Guerreros explains what differentiation is. A Company should follow a Differentiation Focus Strategy when: It has a very Unique product or Niche. Differentiation Focus strategy Example Put simply; it is the process of distinguishing a good or service from others, i.e., making it stand out. Products that display a different visual style, include different features or handle different tasks stand out from those offered by the competition. Danger - A white water rafting tour provides just the right level of risk for thrill seeking customers. Living in Houston, Gerald Hanks has been a writer since 2008. Examples of Product Differentiation Companies introducing a new product often cite its lower costs to buy or use. Therefore, we only consider one characteristic. Apple has made product design a hallmark of its differentiation strategy since the company's origins. Louis Vuitton is a good example of a company that has followed a Differentiation Strategy: They have differentiated almost all their products with their famous ” LV monogram”. Differential pricing allows a company to set up different price points for different customers for the same product. When you position a… Companies do this because they want to show customers their product’s attributes and uniqueness. Product differentiation may involve, promotions, product packaging, product design, quality, and extra features. Examples of Product Differentiation Safety - An airline has a better reputation for safety than its competitors. Positioning is a strategic process that marketers use to determine the place or “niche” an offering should occupy in a given market, relative to other customer alternatives. Customer Segmentation for the Hotel Industry, Harvard Law School: Chapter 6: Differential Pricing, Legal Planet: The Insurance Industry Helps Us to Adapt to Climate Change, CNN: Web Sites Change Prices Based on Customers' Habits, Federal Trade Commission: Price Discrimination Among Buyers: Robinson-Patman Violations; July 2008. 14 Examples of Service Differentiation posted by John Spacey , November 11, 2017 Service differentiation is the design and delivery of a service to have unique and valuable characteristics relative to other services in the market. Custom transport services, such as shuttle buses and limousine services, also employ differential pricing based on the season and time of day. They are fearless innovators who are always first to market. Conclusion. Bars and clubs offer "Happy Hour" drink specials during early evening hours but raise their drink prices for the late evening crowds. The different factors on which the process is implemented include: Top Competition: AT&T, Verizon Wireless. Humboldt University Berlin: Individual Price Discriminaton – An impossibility? There is no mistake when it comes to differentiating a Louis Vuitton bag from a normal bag. Before starting his writing career, Gerald was a web programmer and database developer for 12 years. He is president of marketing consultancy Trout & Partners and has consulted for such companies … Let’s look at a few. It is common when consumers consider more complex products or marketing executives are looking at more sophisticated markets. This can then be communicated in their marketing and sales strategy, for instance when talking to … Companies in this category lead the pack when it comes to introducing new products, even at the expense of cannibalizing their own offerings. A major aspect of a product differentiation strategy comes from product design. If the company implements it successfully, product differentiation can give a good a competitive advantage. Next on our list of differentiation strategy examples is Tiffany & Co. He begins by talking about a company that created a fast car. Examples of Product Differentiation Companies are fairly imaginative when it comes to differentiating their products. When differentiating a product from others, it does not necessarily have to be completely different or new. Customer se… Distinctive Capability. Since a company with a differentiated product competes as a quasi-monopoly in its market segment, there is a reduced threat of buyers. One approach that is common in product differentiation is to use packaging that is perceived as being more user friendly. Example: Apple — Differentiation Strategy Apple Inc. is an American corporation that designs and manufactures computer hardware, software and other consumer electronics. Examples of Products With Differential Pricing. Examples of product differentiation including unique design, customer service, and price. The jewlery company, which you... 3. T-Mobile is a cellular company that's shedding … When a person is faced with a shelf of products or similar services, … There are many well-known brands and businesses implementing a wide variety of strategies. Product differentiation What is product differentiation? 9 Brands That Employ Excellent Differentiation Strategies Differentiation strategy … Lego. This is the general area that most B2B marketers — and probably most consum… EXAMPLES OF CORPORATE DIFFERENTIATION Virgin Airlines. With horizontal differentiation, the product is harder to classify because it has many features. Perhaps, their products would not be so desired without this design… Production Efficiency: Your company is a well oiled machine. Define unique selling proposition: Product differentiation allows companies to narrow down what it is that makes their products superior to the competition. Apple Mixed differentiation is a combination of both vertical and horizontal differentiation. The product differentiation process may be as simple as redesigning of packaging to introducing a brand new functional feature in a product. Differentiation … If you want to learn more about product differentiation strategies and join a community of … Family-owned restaurants often promote lunch specials on many of the same meals they serve during dinner hours. Product differentiation is a marketing process in which a product is differentiated from others. 1) SIMPLE VS. BANK OF AMERICA. When differentiating a product from others, it does not necessarily have to be completely different or new. When we choose between a Coke, Pepsi, or Dr. Pepper, for example, taste drives our decision. One method that businesses use to establish differential pricing is granting volume discounts. Now, what do these two things mean? Unique products or services. Small-business owners can also offer discounts to members of specific groups. Companies do this because they want to show customers their product’s attributes and uniqueness. It may seem now like a foregone conclusion that The Lego Movie would be a huge hit, but... Dove. He has contributed to several special-interest national publications. A firm’s success in strategy rests upon how it positions itself in respect to its environment. By applying … Examples of Product Differentiation Companies introducing a new product often cite its lower costs to buy or use. The car’s speed distinguishes it from other cars in the market. In many industries, the barrier to entry has dropped significantly in recent years. It also gives them a better chance to compete against more popular products. It made the car ‘fast’ because it wanted to appeal to a specific group of people. Apple has made product design a hallmark of its differentiation strategy since the company's origins. A company attempts to make its strategy a sustained competitive advantage. SmallBusiness.Chron.com says the following regarding vertical differentiation and horizontal differentiation: “Horizontal differentiation refers to distinctions in products that cannot be easily evaluated in terms of quality.”, “This stands in contrast to vertical differentiation, where the distinctions between products are objectively measurable and are based on the products’ respective level of quality.”. Examples of Products With Differential Pricing. It includes actual physical and perceived differences, of which the latter can be acquired through advertising. Positioning is a strategic process that marketers use to determine the place or “niche” an offering should occupy in a given market, relative to other customer alternatives. While it is illegal to offer preferential pricing to members of a religious, racial or ethnic group, business operators can offer discounts to customers belonging to civic organizations or charitable agencies. We hope these unique selling proposition examples give you some inspiration for your own. Differentiation is the process companies use to make a product or service stand out from its competitors in ways that provide unique value to the customer. Differentiation strategy allows a company to compete in the market with something other than lower prices. Introduction… Michael Porter is a professor at Harward Business School. For instance, if a small shoe store has a sale where the customer buys the first pair of shoes at the regular price and gets a second pair at half price, the store owner sells more merchandise, and the customer gets a bargain. Differentiation is a marketing technique that enables a company to meet the specific needs of different market sectors by developing different product offers or versions for each, rather than attempting to cover all sectors with a standard product. 12 TERRIFIC BRAND STRATEGY EXAMPLES. As a side effect, these industries have seen substantial increases in competitive products. Vertical differentiation exists when consumers compare a product according to one feature – quality. Differential pricing allows a company to set up different price points for different customers for the same product. Differential pricing allows a company to set up different price points for different customers for the same product. Conversely, members of a local art museum may receive discounts on art lessons, art books and lecture series. … Differentiation is the process companies use to make a product or service stand out from its competitors in ways that provide unique value to the customer. The increased competition has divided the demand among different players in the market. 9 Perfect Brand Examples of Why It Pays to Differentiate Lush. For example, a small bookstore may offer discounts to teachers, students, librarians or members of a literary society. The segment in which the product is Unique. Product differentiation may take the form of features, performance, efficacy (or the ability of the product to do what it is purported to do), meeting specifications, or a number of other criteria. For small companies, this can be great. Movie theaters offer reduced-price tickets for matinee screenings in an attempt to bring in more moviegoers during daylight hours. Customer service, experience, and advertising campaigns are also relevant. Are Theater Workers Exempt From Federal Overtime Laws? Below are twelve examples of competing brands that have tailored their marketing to accentuate their differentiation to the consumer. It also gives them a better chance to compete against more popular products. By creating product differentiation strategies for your business you stand a better chance of competing against other companies that are larger and have more money to spend. A feature that also differentiates the two medications is ‘price.’ Brand names are much more expensive than generic medications. For example, in the pharmaceutical industry, a person can decide whether to get a branded medication or a generic. It's also known as "price differentiation" or "price discrimination," and the reasons for the price changes can include location, time of day, season of the year and even product brand. In our previous article about the process of entrepreneurship, we discussed how entrepreneurial innovation could simply mean being able to communicate how your business is different to others.We asserted that this is a defining quality of a successful entrepreneur and an important part of the decision making process within the business. The company headquarters is in Cupertino, California, CEO and co-founder is Steve Jobs and the company boasts of 284 retail locations spanning 10 different countries. Definition and examples, Competitive advantage means having an edge, Discovering New Points of Differentiation, regarding vertical differentiation and horizontal differentiation. Product differentiation is the process of distinguishing a product or service from others. Examples of Successful Strategic Alliances, Organizations Exempt From Fair Labor Standards Act. Heads up: Those two concepts will come up in the product differentiation examples below. It can be useful because they then have a chance to compete against bigger companies. For small companies, this can be great. Though differential pricing is more common in the service sector, some manufacturers of goods also use differential pricing based on customer preferences, available discounts and selling strategies. When we talk about differentiation, Apple is one of the brands that will most often come to our mind. The travel industry drops its prices during times of low demand and raises them during peak demand periods. Safety - An airline has a better reputation for safety than its competitors. Price Adaptation Strategies and Marketing Management, Privacy Notice/Your California Privacy Rights. Product differentiation is the introduction of unique, distinctive characteristics or features to a product to ensure a USP (unique selling proposition) of the product. If Company X produces a coffee maker virtually identical to that of Company … © 2020 - Market Business News. Products that display a different visual style, include different features or handle different tasks stand out from those offered by the competition. A major aspect of a product differentiation strategy comes from product design. It was specifically appealing to consumer who like speed. It can be useful because they then have a chance to compete against bigger companies. Tiffany & Co 11 Amazing Differentiation Strategy Examples (in 2020) 1. All rights reserved. However, they cannot determine which one is superior in quality. Consumers can say “Product A is better than Product B.”. This may include products within the company or of the same line. Here are some examples. Traditional banks have many branches and were slow to … This has made it very important for businesses to make their customers understand what different they have to Outsourcing – as many other companies do, IKEA also outsources the manufacturing of its products in low-wage countries, which allows them to cuts on costs additionally. Restaurants, movie theaters, amusement parks and numerous other entertainment venues employ differential pricing practices. S speed distinguishes it from other cars in the pharmaceutical industry, a person can decide whether to a. Differentiator is broad, but they consume a lot of resources and expertise to achieve and horizontal.., and extra features right level of risk for thrill seeking customers reputation for than! Its strategy a sustained competitive advantage means having an edge, Discovering new points of differentiation, the product harder! Gerald Hanks has been a writer since 2008 seeking customers marketing Management, Privacy California. 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